Leasing a car can be more affordable than buying, but the math behind the monthly payment is significantly different from a standard auto loan. To get the best deal, you need to understand three primary components: Depreciation, the Money Factor, and the Residual Value.
1. Depreciation Fee
This is the largest part of your payment. It represents the value the car loses while you are driving it.
Formula:(Adjusted Capitalized Cost – Residual Value) / Lease Term.
The Adjusted Cap Cost is the price of the car minus your down payment and trade-in.
2. Finance Fee (Rent Charge)
Think of this as the interest on the lease. Instead of an APR, leasing companies use a "Money Factor."
Formula:(Adjusted Capitalized Cost + Residual Value) × Money Factor.
To convert Money Factor to a standard interest rate (APR), multiply it by 2,400.
3. Residual Value
The residual value is the estimated worth of the car at the end of the lease. This is set by the bank and is usually non-negotiable. A higher residual value means lower monthly payments because you are "consuming" less of the car's value.
Example Calculation
If you lease a car worth $35,000 with a 60% residual after 3 years (36 months), and a $3,000 down payment:
Residual Value: $35,000 × 0.60 = $21,000
Total Depreciation: ($35,000 – $3,000) – $21,000 = $11,000
Monthly Depreciation: $11,000 / 36 = $305.55
Money Factor: If your APR is 3%, your MF is 0.00125.
Negotiate the Sale Price: The MSRP isn't fixed. Just like buying, you can negotiate the "Capitalized Cost."
Check for Incentives: Manufacturers often offer "lease cash" or rebates that act as a down payment.
Mind the Mileage: Choose a mileage limit that matches your driving habits. Higher mileage limits lower the residual value, which increases your payment.
function calculateLease() {
var msrp = parseFloat(document.getElementById('msrp').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var tradeIn = parseFloat(document.getElementById('tradeIn').value);
var term = parseInt(document.getElementById('term').value);
var moneyFactor = parseFloat(document.getElementById('moneyFactor').value);
var residualPercent = parseFloat(document.getElementById('residualPercent').value);
var salesTax = parseFloat(document.getElementById('salesTax').value);
if (isNaN(msrp) || isNaN(downPayment) || isNaN(moneyFactor) || isNaN(residualPercent)) {
alert("Please fill in all fields with valid numbers.");
return;
}
// 1. Calculate Adjusted Capitalized Cost
var capCost = msrp – downPayment – tradeIn;
// 2. Calculate Residual Value
var residualValue = msrp * (residualPercent / 100);
// 3. Monthly Depreciation Fee
var monthlyDepreciation = (capCost – residualValue) / term;
if (monthlyDepreciation < 0) monthlyDepreciation = 0;
// 4. Monthly Finance Fee (Rent Charge)
// Logic: (Cap Cost + Residual) * Money Factor
var monthlyFinance = (capCost + residualValue) * moneyFactor;
// 5. Base Monthly Payment
var basePayment = monthlyDepreciation + monthlyFinance;
// 6. Tax
var taxAmount = basePayment * (salesTax / 100);
// 7. Total Monthly Payment
var totalMonthly = basePayment + taxAmount;
var totalLeaseCost = (totalMonthly * term) + downPayment + tradeIn;
// Update UI
document.getElementById('monthlyPaymentDisplay').innerText = '$' + totalMonthly.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('depreciationValue').innerText = '$' + monthlyDepreciation.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('financeValue').innerText = '$' + monthlyFinance.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('taxValue').innerText = '$' + taxAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalCostValue').innerText = '$' + totalLeaseCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('results-area').style.display = 'block';
// Scroll to results smoothly
document.getElementById('results-area').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}